Income Distribution: Female/male earnings
Between 1994 and 2004, the growth in average hourly ordinary-time earnings among full-time adult non-managerial employees was higher for males than females, resulting in a slight widening of the gender wage gap.

Wages and salaries were the principal source of income for 57% of Australian households overall in 2000-01 (see Australian Social Trends 2004, Household income). In general, men and women make different contributions to household incomes, with men being more likely than women to participate in the labour force, and employed men usually working more hours than employed women.

Among all employees, regardless of the number of hours worked per week, the average weekly total earnings of females was $611.50 in May 2004, representing slightly more than two-thirds (68%) of the average weekly total earnings of males ($897.50).(endnote 1) To examine the issue of equal pay for equal work, earnings-sensitive differences in the labour force characteristics of male and female employees, such as different number of hours worked per week, need to be standardised.

When looking at male and female employees in more closely comparable circumstances, the gender pay gap is much narrower. In 2004, the ratio of female to male average hourly ordinary-time earnings among full-time adult non-managerial employees was 0.92. In other words, female earnings were 92% of male earnings, resulting in a gender wage gap of 8%.

Most of the data presented in this article have been drawn from the ABS Survey of Employee Earnings and Hours (EEH), first conducted in May 1974 and most recently conducted in respect of May 2004. Other data have been sourced from the Organisation for Economic Co-operation and Development (OECD) and the ABS Employee Earnings, Benefits and Trade Union Membership Survey (EEBTUM), run annually in August.Earnings is gross taxable income received from employment.

Ordinary-time earnings are payments for award, standard or agreed hours of work, including allowances, penalty payments, payments by measured result and regular bonuses and commissions. Excluded are items such as amounts salary sacrificed, overtime payments, pay in advance, leave loadings and redundancy payments.

Employees are people who work for an employer and receive pay or payment in kind, including those operating their own incorporated business.

Full-time employees usually work at least 35 hours a week, or the agreed or award hours for a full-time employee in their occupation (EEH), or at least 35 hours in the survey reference week (EEBTUM).

Adult employees are employees who are 21 years of age and over, and employees under 21 years who are paid at the full adult rate for their occupation.

In EEH, non-managerial employees are classified as such by employers based on supervisory and strategic responsibilities, and entitlement to paid overtime. In EEBTUM, they comprise all ASCO major groups except 'Managers and administrators'.

TRENDS IN AUSTRALIAN EARNINGS RATIOS

In Australia, prior to the 1970s, female pay rates were set as a proportion of the adult male basic wage. Differences between female and male wages were greatly reduced by a series of decisions on specific awards which followed a 1972 decision granting equal pay for equal work.

The gender wage gap, as measured by the ratio of female to male average hourly ordinary-time earnings among full-time adult non-managerial employees, narrowed markedly between 1974 (0.78) and 1978 (0.90).

A further but less pronounced narrowing of the pay gap occurred between 1983 (0.88) and 1994 (0.94). Over the last decade, the gap has moved within the range of 0.90 to 0.94.

OVERSEAS RATIOS AND TRENDS

There is interest in knowing how levels and trends in the Australian gender wage gap compare with those in other countries. There is also an interest in the reasons for differences between countries, and the underlying factors that contribute to variation and change in the size of the gap.

Comparisons between countries can be problematic. For example, some of the international difference in female/male earnings ratios may be due to the lack of strict comparability of data, caused by slightly different national definitions of earnings and hours worked, different data collection methods, and different age ranges. (endnote 2)

Issues of strict comparability aside, narrowing of the gender wage gap occurred in many other OECD countries during the closing quarter of the 20th century. However, at around the end of the century, the gap was considerably narrower in some countries than in others. As reported by the OECD, the Australian female/male earnings ratio (of average gross hourly total earnings among full-time wage and salary employees aged 18-64 years) of 0.91 in 2000 was higher than in many other OECD countries at around the same time. This indicates that Australia has a relatively small gender wage gap. (endnote 2)

Female/male ratio of average hourly earnings among full-time wage and salary employees(a) aged 20-64 years(b) - selected countries and years

According to the OECD, there is a range of factors that can influence a country's gender wage gap. These include differences between men and women in level of education, types of jobs held, amount of employment experience accumulated, and rate of employment of those with a relatively low level of education and skill. The structure of remuneration rates, premiums received for working in high-paying industries and occupations, wage setting practices and government policies and legislation can also affect a country's pay gap. (endnote 2)

The remainder of this article focuses on these factors in the context of the Australian gender wage gap.

A comparison of the earnings of men and women can be affected by compositional differences between male and female labour forces. One way of standardising for these compositional differences is to select a subset of employed men and women with similar earnings-sensitive labour force characteristics. To examine the issue of equal pay for work of equal value, this article largely focuses on average hourly ordinary-time earnings of full-time adult non-managerial employees, derived from data collected in the ABS Survey of Employee Earnings and Hours (EEH). This measure has a variety of features that makes it an informative indicator of the extent to which men and women receive equal pay for performing work of equal value.

The earnings measure (unit of analysis) is average hourly ordinary-time earnings and has been chosen because:

It is an hourly measure. On average, male full-time employees work more hours per week than female full-time employees.

It is a measure of ordinary-time earnings. Overtime earnings are usually paid at a higher hourly rate than ordinary-time earnings and, on average, male full-time employees work more overtime hours per week than female full-time employees.

The population for comparison is full-time adult non-managerial employees and has been chosen because:

The issue of pay discrimination is relevant to employees only.

The occupational profiles of full-time and part-time employees can be different. Some employers do not allow some jobs to be performed on a part-time basis. (endnote 3)

Adult and junior rates of pay often differ widely. The gender wage gap would be affected if one sex had a higher proportion of juniors.

Managerial employees are generally not paid at an hourly rate.

Extremely high, outlying managerial earnings can distort means.

There were 7.7 million employees within the scope and coverage of the May 2004 EEH. The majority of these employees (4.1 million representing 54%) were full-time adult non-managerial employees.

WAGE SETTING PRACTICES

Along with other countries, Australia was influenced by the OECD's Dahrendorf Report on labour market flexibility, released in 1986. By the early 1990s there was general support for moving away from centralised determination of wages and conditions via industry and occupational level awards, in favour of setting wages and conditions through enterprise and workplace agreements. Enterprise bargaining was formally introduced in Australia in 1993 through amendments to the Industrial Relations Act 1988, then actively promoted by the Workplace Relations Act 1996.(endnote 4)

Currently in Australia, there is a range of methods used to set the pay of employees, including awards, collective agreements and individual arrangements. In 2004, full-time adult non-managerial employees who had their pay set by award only (i.e. who were not paid more than the award rate of pay) received considerably lower average hourly ordinary-time earnings ($16.70) than those who had their pay set by collective agreement ($24.10) and individual arrangement ($23.30). A higher proportion of female full-time adult non-managerial employees had their pay set by award only (15%) compared with their male counterparts (12%).

PAY RATES

There is variation among both industries and occupations in the gender mix of employees, the methods by which pay is set, and the level of average hourly earnings. The overall female/male earnings ratio will partly reflect such structural differences, if men tend to be more heavily concentrated in higher-paying industries and occupations that are more likely to set pay by collective agreement or individual arrangement.

...industry differences

The proportion of full-time adult non-managerial employees who were women ranged widely between industries (from 10% in the Construction industry to 71% in the Health and community services industry).

For both men and women, there were some large differences in pay rates between industries. In May 2004, among both male and female full-time adult non-managerial employees, average hourly ordinary-time earnings for those employed in the Mining industry ($34.30 for men and $27.10 for women) were almost double the hourly earnings of those in the Accommodation, cafes and restaurants industry ($17.60 for men and $17.10 for women) and the Retail trade industry ($18.10 for men and $17.00 for women). Overall, differences in hourly earnings between industries tended to be greater than earnings differences between men and women in the same industry.

Between May 1994 and May 2004, average hourly ordinary-time earnings increased at a slightly higher rate among male (51%) than female (48%) full-time adult non-managerial employees. However, in particular industries such as Mining, and Education, female earnings increased more than male earnings in percentage terms.

While there was a gender pay gap in each industry, the female/male earnings ratio was much higher in some industries (e.g. Government administration and defence 0.98) than others (e.g. Finance and insurance 0.77, and Mining 0.79). The wage gap tended to be narrower in industries with lower hourly earnings, especially lower male earnings, and wider in industries with higher hourly earnings....occupational differences

Hourly rates of pay differ between occupations. In general, people in highly skilled jobs receive higher rates of pay than those in less skilled jobs. Differences in the concentration of men and women in particular occupations contribute to the gender wage gap.

The skill level of an occupation is measured by the amount of formal education and training and previous experience usually required for entry. In 2004, for both male and female full-time adult non-managerial employees, average hourly ordinary-time earnings rose with occupation skill level.

However, there were some marked differences between occupations at the same skill level. For example, at the highest skill level, both male and female Medical practitioners had considerably higher hourly earnings ($47.40 and $38.80 respectively) than male and female Social welfare professionals ($22.70 and $24.10).

Overall, 40% of full-time adult non-managerial employees in 2004 were women. Some occupations had a much higher than average proportion (e.g. Enrolled nurses 90% and Hairdressers 91%) while others (e.g. Mining, construction and related labourers) had a much lower than average proportion. Within each skill level, occupations with higher hourly earnings generally had lower proportions of women.

In 2004, at most skill levels, there were examples of relatively high-paying, predominantly male occupations with comparatively low reliance on the award only method of pay setting. There were also examples of lower-paying, largely female occupations, often substantially reliant on award increases for their pay rises.

The accompanying table shows the variability in hourly earnings and the gender mix that can exist among occupations at the same skill level. The two occupations presented for each skill level represent the highest and lowest paid recognisable occupation minor groups at that level which have a sufficiently sized sample to produce reasonable estimates. At Skill level 3, for example, Mechanical engineering tradespersons (99% male) had considerably higher hourly earnings than Hairdressers (91% female) and were much less likely to have their pay set by award only.

A reason often given for the persistence of a gender wage gap in Australia is that work performed by female-dominated occupations is undervalued relative to work performed by male-dominated occupations. While men and women doing the same job for the same employer may get paid at the same hourly rate, men and women performing 'comparable' work in very different occupations are paid at different rates. (endnote 5)

Pay rate differences between occupations at the same skill level suggest that factors other than skill (e.g. danger, remoteness, labour supply and demand, competitiveness and bargaining strength) also influence the hourly earnings of occupations in Australia.

EMPLOYMENT EXPERIENCE

Within the same occupation, female average hourly ordinary-time earnings are often (but not always) lower than male earnings. This may be partially attributable to different rates of pay for working at different grades of an occupation, and could reflect differences in levels of lifelong accumulation of experience obtained from working in a particular occupation. For example, the female/male average hourly ordinary-time earnings ratio of 0.88 among full-time adult non-managerial police officers in 2004 is likely to largely mirror the distribution of male and female officers at different grades across the ranks of Australian police forces.

Some occupations are typically characterised by career progression across an incremental pay scale. In these occupations, women who withdraw from the labour force to raise children or perform other caring roles may forgo or postpone promotion-based increases that men of the same age may receive through continuous employment in an occupation.

Female/male average hourly earnings ratio(a) by age group - August 2004

In 2004, the female/male average hourly total earnings ratio was relatively high among 15-19 year old full-time non-managerial employees (0.98) and even higher among those aged 20-24 years (1.07). Thereafter, the ratio generally declined with increased age, falling to 0.82 among 45-49 year olds before rising again. This pattern was similar to that which prevailed a decade earlier, in 1994.

In addition to relative differences in lifelong accumulation of employment experience by same age male and female full-time non-managerial employees, higher female/male earnings ratios among younger age groups may represent fewer gender differences in educational attainment and employment opportunities. Lower earnings ratios among older age groups might also reflect the types of jobs women do when combining work and family.

Other data sources

There is a range of ABS data sources and earnings measures that could be used to compare male and female earnings. For explanation and discussion of the various options see Chapter 11 of Labour Statistics: Concepts, Sources and Methods, 2001 (ABS Cat. no. 6102.0). Choice of the best available combination of data source, earnings measure, unit of analysis and population for comparison is mainly determined by the particular issue being analysed and the specific question being researched. Practical considerations such as data quality, survey sample size, standard errors on estimates, type of variables stored on a data file, and the timespan for trend analysis, also influence selection of the best available combination of options.

In addition to the EEH data used for the main analysis in this article, data from the EEBTUM survey can also be used to examine female and male earnings. EEBTUM is an annual household survey that includes data on a range of characteristics of employees in their main job, such as age, hours worked, leave entitlements, occupation and industry. The earnings measure in EEBTUM is based on amount of total last pay. However, it does not separate ordinary-time earnings from overtime earnings.

The Average Weekly Earnings (AWE) survey is sometimes used to compare earnings of men and women. While AWE data is available quarterly, it is a business survey and has little detail about the characteristics of employees. It does not include hourly earnings information, nor a decomposition by occupation. These items are important in understanding differences in earnings of male and female employees.